Credit Analysis

A type of analysis an investor or bond portfolio manager performs on companies or other debt issuing entities encompassing the entity's ability to meet its debt obligations. The credit analysis seeks to identify the appropriate level of default risk associated with investing in that particular entity.

By identifying companies that are about to experience a change in debt rating, an investor or manager can speculate on that change and possibly make a profit. For example, assume a manager is considering buying junk bonds in a company, if the manager believes that the company's debt rating is about to improve, which is a signal of relatively lower default risk, then the manager can purchase the bond before the rating change takes place, and then sell the bond after the change in rating at a higher price.


Investment dictionary. . 2012.

Look at other dictionaries:

  • Credit analysis — is the method by which one calculates the creditworthiness of a business or organization. The audited financial statements of a large company might be analyzed when it issues or has issued bonds. Or, a bank may analyze the financial statements of …   Wikipedia

  • Credit analysis — The process of analyzing information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations. Related: default risk * * * credit analysis credit analysis ➔ analysis * * * credit …   Financial and business terms

  • credit analysis — Evaluating information on companies and bond issues in order to estimate the ability of the issuer to live up to its future contractual obligations. Related: default risk. Bloomberg Financial Dictionary * * * credit analysis credit analysis ➔… …   Financial and business terms

  • Judgmental Credit Analysis — A method of approving or denying credit based on the lender s judgment rather than on a particular credit scoring model. Judgmental credit analysis entails evaluating the borrowers application and using prior experience dealing with similar… …   Investment dictionary

  • International Bank Credit Analysis —   A company which rates the credit worthiness of banks. See also Bank Research for Eastern Europe, European Bank for Reconstruction and Development, Euronotation and Standard & Poor …   International financial encyclopaedia

  • Comparative credit analysis — A method of analysis in which a firm is compared to others that have a desired target debt rating in order to infer an appropriate financial ratio target. The New York Times Financial Glossary …   Financial and business terms

  • comparative credit analysis — Fin an analysis of the risk associated with lending to different companies …   The ultimate business dictionary

  • comparative credit analysis — Comparing a firm to others that have a desired target debt rating in order to deduce an appropriate financial ratio target. Bloomberg Financial Dictionary …   Financial and business terms

  • analysis — a‧nal‧y‧sis [əˈnælss] noun analyses PLURALFORM [ siːz] [countable, uncountable] 1. a careful examination of something in order to understand it better: • The researchers carried out a detailed analysis of recent trends in share prices. •… …   Financial and business terms

  • credit analyst — ➔ analyst * * * credit analysis UK US noun [C or U] (plural credit analyses) (also credit appraisal) ► FINANCE, BANKING a calculation of the risk of lending money to a particular person, company, or government based on their ability to pay it… …   Financial and business terms

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.